LimeWire, one of the world's most popular peer-to-peer filesharing websites, has been shut down after a four-year legal battle with the US music industry.

A federal court in New York issued a "permanent injunction" against LimeWire late on Tuesday, ruling that the platform intentionally caused a "massive scale of infringement" by permitting the sharing of thousands of copyrighted works by its 50 million monthly users.

Founded in 2000 by Mark Gorton, a former Wall Street trader, LimeWire is now restricted from allowing the searching and sharing of copyrighted material. The website will continue "working with the music industry to move forward", a LimeWire spokeswoman confirmed.

US judge Kimba Wood ruled that record companies "have suffered – and will continue to suffer – irreparable harm from LimeWire's inducement of widespread infringement of their works", adding that the potential damages were "staggering".

The court also ruled that LimeWire should "use all reasonable technological means to immediately cease and desist" copyright infringements still taking place through applications already downloaded.

In May, Wood found LimeWire liable for widespread copyright infringement. The level of damages faced by the site's New York-based parent company, Lime Group, will be decided in January 2011.

The RIAA said LimeWire has cost the music industry hundreds of millions of dollars in revenue.

According RIAA figures, US recorded music sales fell to $7.7bn in 2009 from $14.5bn in 1999. The rise to prominence of peer-to-peer filesharing networks is singled out as a primary factor for this decline by the RIAA.

The site's popularity is reflected in a survey by NDP Group, which found that LimeWire was used by 58% of people who have downloaded music from a peer-to-peer network in the year from May 2009.

Following Tuesday's injunction, the RIAA said: "For the better part of the last decade, LimeWire and Gorton have violated the law.

"The court has now signed an injunction that will start to unwind the massive piracy machine that LimeWire and Gorton used to enrich themselves immensely.

"In January, the court will conduct a trial to determine the appropriate level of damages necessary to compensate the record companies for the billions and billions of illegal downloads that occurred through the LimeWire system."

Earlier this year, LimeWire planned to release a service called Spoon, which would allow users to legally purchase copyrighted tracks. The deal fell through, however, when record labels were told that the site would need at least a year to migrate illicit filesharers to the new service.

Napster, which claimed more than 100 million users at the height of its popularity at the beginning of the decade, collapsed in 2002 under the strain of a number of legal challenges.

The company reinvented itself as a legal download service in 2004, later launching what it claimed was "the world's largest and most comprehensive MP3 store", before unveiling a "freemium" model – similar to that of Spotify – last year.